Friday, December 28, 2012

Danger of balanced budgets

Yesterday, Ezra Klein posted an article that surprised me, For Republicans, It's Not About Deficit Reduction. In it, he says that Republicans don't like budget deals because they claim that the tax increases are real while the spending cuts are just chimera. I'd never thought of this because, of course, there is only really evidence for exactly the opposite.

The argument that I've long made goes something like this. Suppose we cut a trillion dollars out of Social Security and raise taxes by a trillion dollars. There is basically no chance of getting the Republicans to go along with expanding Social Security at a later time. But tax cuts are usually popular with Democrats. So within a couple of years (especially when the economy is doing well), it will be easy to cut taxes.

And there is a major recent example of this. In 1993, under Clinton, the Democratic Party did the unpopular work of cutting spending and raising taxes. As soon as they could, those tax rates were lowered. The spending cuts are mostly still with us, but the Republicans are apoplectic about the idea of even raising the top tax rates back up to where they were.

Of course, it wasn't just tax cuts. The Republicans manage to spend ridiculous amounts of money on two wars and a huge corporate giveaway in the form of Medicare Part D. Klein points all this out, of course. But he dabbles in a bit of Republican apologetics. He argues that Democrats should still be for a balanced budget because it is good for the country, regardless of what happens in 8 years.

I don't really understand this. Chris Hayes often makes the argument that the Republicans don't care about the deficit. On last Sunday's show, he gave an example of this: the only thing the Republican controlled House has managed to pass is a repeal of the defense sequester. If they cared about the budget, they would have managed to do something other than make it worse.

Republicans just know that the government is too big. Similarly, the vast majority of Villagers just know that the budget deficit is too big. What's more, they have always known that it is too big. Before Reagan was in office (26% of GDP), it was too big. After Reagan left office (42% of GDP), it was too big. And now (65% of GDP), it is too big.

This is a recipe for disaster. On one side, you have a group that simply wants to destroy the government. On the other, you have people who think the budget deficit is a terrible thing. Put together, you still end up with a "starve the beast" approach to the budget. Our only hope is that liberals stand up for the positive role that government plays in the lives of Americans. Balancing the budget is a fine idea, but it is not on the top of the list. It is not an end in itself.